A sum of money promised you at a time in the future is worth only as much as you would have to put in a bank today to have that sum available at that point in time.

Question

Quizplus · Accepted Answer

This is the concept of present value, which takes into account the time value of money and inflation. The amount you would need to invest today to have the promised sum available in the future is calculated using a discount rate, which takes into account the expected return on investment and the risk associated with the investment.

A Sum of Money Promised You at a Time in the Future